The UK is moving to overturn a ban on specific crypto exchange-traded notes (ETNs) for retail investors, which was put in place in 2019. As per an announcement on August 1, retail access to crypto ETNs will be allowed starting this Wednesday, provided the ETNs are traded on exchanges approved by the FCA (Financial Conduct Authority).
While ETFs (Exchange-Traded Funds) remain banned for retail investors in the UK, ETNs are essentially debt instruments linked to cryptocurrency, lacking any direct backing by underlying assets.
As the ban gets lifted, various firms operating within the UK are voicing their opinions about the implications of this regulatory change for retail investors. For instance, BlackRock, the largest asset management company globally, is said to be preparing to offer its iShares Bitcoin exchange-traded product for retail trading from October 8 onward.
Hunter Horsley, CEO of Bitwise, expressed his excitement on X, stating, “I’m looking forward to serving more investors in our European home market at long last.”
Ian Taylor, a board adviser at CryptoUK, noted, “Until now, the UK has been an outlier on ETNs. We hope this development will enhance consumer protections while we continue advocating for lifting the ETF ban for retail investors.”
In an announcement from FCA, any asset manager intending to provide ETN trading to UK retail investors must ensure their ETNs are listed on a Recognized Investment Exchange, following consultations with industry representatives and consumer groups.
Companies like CoinShares and Bitwise will be positioned to offer digital asset-focused exchange-traded products. However, a report from Financial Times indicated that retail investors might face a waiting period of up to a week before they can start trading due to the timetable for FCA’s acceptance of prospectuses.
As of the latest updates, there are no indications from the FCA about lifting restrictions on crypto derivatives or ETFs for retail investors. According to their notice, the current regulations prevent retail investors from directly investing in cryptoassets through ETFs without an update to the regulatory framework. In contrast, spot cryptocurrency-linked ETFs have been finally available for trading in the US since their approval in January 2024. The Security and Exchange Commission is currently under constraints as US lawmakers have not passed a bill to support funding beyond October 1, affecting their capacity to review any new crypto ETF applications.
